Finding and working with suppliers

Good suppliers can help you offer quality products and services to your customers.

The right suppliers will reduce the risk of supply chain disruptions. Unreliable suppliers can leave you unable to trade.

Having links with different suppliers can also help you avoid these risks.

Researching and choosing suppliers

Do your research before choosing suppliers for your business.

You can research suppliers online, or join business networks or associations. Talk to contacts, friends or family for recommendations.

When researching a potential supplier, consider their:

location
quality
price
alignment with your business values
effect on the environment.

Some suppliers may provide extra support or service if you are starting a new business. For example, they may offer flexible credit terms for the first few months.

Use this checklist to help find the best suppliers for your business. It lists questions to ask and what to think about when researching suppliers.

Research question and considerations

Best supplier options for my business

Can I find a local supplier?

Benefits of local suppliers may include:

fast delivery
knowledge of local markets and customers
fast communication
less negative effects on the local environment.

Best supplier options for your business

Can I use an overseas supplier?

Overseas suppliers may offer:

more choice
lower production costs.

Compare these benefits with the potential negatives of overseas suppliers, including:

shipping costs and delays
import requirements and regulations
cost of warehousing (for large quantity orders).

Understand the basics of importing.

Best supplier options for your business

How stable and reliable is the supplier?

Are their terms and conditions reasonable?
How quickly can they ship?
Will they always have what you need in stock?
Are they financially stable?
How long have they been in business?
Are they recommended by other businesses?

Best supplier options for your business

How important are quality and price for your business?

Is the price matched to the quality of products or services?
Can your business manage price fluctuations?
Will your business rely on always having the highest quality product?

Best supplier options for your business

Does the supplier cause any ethical or environmental issues?

Is the supplier providing a safe and fair workplace for their staff in Australia?
Does the supplier have a responsible business environment in accordance with the Modern Slavery Act 2018 (Cwlth)? Check the online register for modern slavery statements.
Are the products likely to cause harm or risks to the community or environment?
Are the products recyclable or sustainable? Learn about becoming an environmentally friendly business.

Best supplier options for your business

Do I have enough potential suppliers?

What will happen if one of your suppliers goes out of business or cannot source what your business needs?
Do you have adequate supplier options?
Can you locate a new supplier quickly (e.g. through your industry association)?

Best supplier options for your business

Negotiating supplier contracts

Once you have chosen a supplier, you will need to negotiate a contract. These contracts may be called supplier agreements, product supply agreements or supply and product contracts.

A supplier contract is a written agreement that explains the terms of trade between you and the supplier. Contracts are usually for an ongoing agreement, not a one-time sale.

A supplier may have their own agreement that you can use to develop your contract, or you may need to draft your own. You can find contract templates on legal company websites or through your industry association.

Your contract should include details on:

the products and services you will receive
how to place orders
payment terms and conditions (e.g. deposit, discounts for early payments, price changes, payment options)
delivery times and quality of the shipped product, including warranties and guarantees
any exclusions (e.g. products are delivered but not installed)
insurance
indemnities (the supplier's legal obligation compensate you if any losses occur because of their actions or the actions of associated parties)
intellectual property
confidentiality
how to manage grievances and disputes
how to end the contract.

Get legal advice before signing

Always get legal advice before you sign a contract. This is very important if your business could be at risk if the supplier does not provide the products or services on time and at the agreed price.

How to negotiate supplier contracts

You and your supplier will each need to review the proposed contract. You then discuss any changes to make the contract acceptable before signing.

Supplier contracts will often include negotiable and non-negotiable items. For example, if you win a government tender, you may not be able to ask for different prices or timeframes.

You might need to negotiate what is in contract. You should:

use effective and clear communication including active listening, summarising and questioning
be calm and professional
research cost prices of products and services so you know what a reasonable price range is
get help from a professional (e.g. lawyer, mentor or business adviser)
gather quotes from different suppliers to understand price and quality
ask for references from other customers of the supplier
look at developing a relationship that benefits both of you (e.g. offer repeat business if they agree to your terms).

Developing relationships with suppliers

Once you have a contract in place, you will need to develop and maintain a positive relationship with all your suppliers.

A good supplier relationship can help to minimise business risks and ensure that you have easy access to the products and services you need.

To establish and maintain good supplier relationships, you should:

nominate 1 person within your business (yourself or another staff member) to be responsible for communicating regularly and directly with your account manager at the supplier
keep communication open and honest
behave ethically and be reasonable in any demands you make
ensure that all product and service problems are identified and communicated promptly
keep on track of all payment milestones, dates and conditions so you are prepared to make payments on time
ensure that the supplier is informed of any internal business issues that could negatively affect the relationship (e.g. issues with paying your account on time)
avoid discussing problems with outside parties other than trusted professional services, such as accountants, legal advisers and business mentors
meet with your main suppliers formally every 6 or 12 months to review your relationship, discuss improvements and plans of both businesses.

Read about cash flow, invoices and payments to learn more about managing suppliers as creditors.

Managing disputes with suppliers

Sometimes a dispute between your business and a supplier will occur. You should deal with these disputes promptly.

Firstly, try to resolve the matter directly with your contact at the supplier.

If this does not resolve the dispute, consider these steps:

Take the matter to the head office or a team leader or manager at the supplier.
Lodge an official written complaint.
Seek professional advice from your lawyer or business adviser.
Discuss the dispute with the Queensland Civil and Administrative Tribunal (QCAT).

Read more about resolving business disputes.

Also consider...

Understand the basics of importing.
Learn more about contracts from the Australian Competition and Consumer Commission.
Review the Global Slavery Index.